The British pound is experiencing correction in late January; however, this correction is just pulling back a little from the new highs the pound made last week. After peaking at 1.4344, GBP/USD started going down slowly because of the fundamentals.
The optimism last week was caused by the USD and some UK reports. The first reason is clear: the greenback weakened upon the US government shutdown and ECB statement after the January meeting. As for the second one, this should be analyzed a bit more carefully.
Mid last week, employment data was released int he UK, which quite supported the pound. The unemployment came at 4.3%, which is a multiple-year low. Neither Brexit nor the EU politicians’ pessimistic comments stating that London will have to ‘pay a dear price’ for leaving the EU in terms of economy and employment sector had any influence on the GBP price. The employment sector grew from 74.5% to 75.3%, which is a great result.
The average wages have also grown, adding 2,5%, just as expected. Thus, the employment sector in the UK is doing great, so, combined with weak dollar, this was a solid support for the pound, which used this support to rally against the greenback.
This week, no such important fundamental releases are expected. Still, the traders will be monitoring mortgage permits and, perhaps, GfK consumer confidence. Overall, however, the now sustainable British pound will be looking at the USD.
Technically, the GBP/USD trend is still ascending, with the market testing the upper long-term channel line. Once the price breaks out the resistance and manages to remain higher, the price may start heading towards the important round number of 1.5000.
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The market is forming a new ascending channel at the momnt, with a local support at 1.3920. Breakout at 1.4260 will help the price enter the upper projection channel, with the new target at 1.4675.
Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex
Disclaimer
Any forecasts contained herein are based on the authors’ particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.
